July 24, 2018 / 11:22 PM / 5 months ago

UPDATE 2-Brazil's GPA benefits from tax change; adjusted profit hits estimates

(Adds figures on profit, revenue, and expenses)

By Gram Slattery

SAO PAULO, July 24 (Reuters) - GPA, one of Brazil’s largest food retailers, reported quarterly results that soared past profit estimates on Tuesday due to significant tax re-calculations.

In a securities filing, GPA, owned by France’s Casino Guichard Perrachon SA, posted second-quarter net income of 526 million reais ($140 million), up over 350 percent from the same period a year ago, and well above the Reuters consensus estimate of 150 million reais.

Earnings before interest, taxes, depreciation, and amortization (Ebitda) also smashed estimates, coming in at 972 million reais, well above the consensus estimate of 535 million reais.

Compensating for the tax adjustment, the company said it would have posted Ebitda of 648 million reais and a net income of 153 million reais, above and in line with estimates, respectively.

Earlier this year, Brazil’s Supreme Court overturned a controversial accounting principle in which retailers were effectively double-taxed. Non-recurring one-time savings resulting from the ruling resulted in a benefit of some 369 million reais for GPA’s wholesale-style Assai format, and approximately 50 million for the firm’s more traditional Multivarejo format.

In the quarter, GPA reported strong profit growth in its Assai and Multivarejo divisions, as expected, with both formats reversing losses from the same period last year.

While the company was able to reduce spending at Multivarejo by 2.7 percent as a percentage of net revenue, that number remained steady at Assai, which could indicate the company is reaching its limits in terms of cost savings in a division whose success is based on low overhead.

In previously disclosed figures, an 11-day truckers’ strike in May knocked 0.7 percent off quarterly net revenue. (Reporting by Gram Slattery Editing by Leslie Adler)

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